New Jersey is the First State to Require Pre-Tax Commuter Benefits

Governor Phil Murphy signed Senate Bill 1567 into law March 1, 2019.  Under the bill, employers subject to New Jersey’s unemployment compensation law that employ 20 or more employees in the state of New Jersey are required to provide pre-tax transit benefits to all employees not currently covered by a collective bargaining agreement.

What Transit Benefits Must be Offered?

Under the Law, employers must provide a pre-tax benefit consistent with the provisions and limits of section 132(f)(1) of the IRC.  This benefit allows an employee to set aside wages on a pre-tax basis, which are then made available to the employee for the purchase of certain eligible transportation services, including transit passes and commuter highway vehicle travel.  The employer is not required to offer a qualified parking benefit, but may offer those benefits.

What is the Deadline to Comply with the NJ Transit Benefits Law?

The law became effective immediately on signing, but will remain inoperative for 365 days following the date of enactment to enable final rules and regulations to be released.  This means although the law is currently in effect, no penalties will be assessed for non-compliance

What are the Penalties for Non-Compliance?

Any employer found to be in violation will be liable for a civil penalty of not less than $100 and not more than $250 for the first violation.  The employer will have 90 days to offer a pre-tax transportation benefit before civil penalty is imposed.  If the employer still does not comply, for each additional 30-day period in which a pre-tax transportation plan is not offered, a civil penalty of $250 will be imposed.

What should employers do now?

Employers who employ 20 or more employees in NJ should take steps to implement a transit benefit plan by February 29, 2020 if they do not already have one in place.  As the final rules and regulations are released, employers should ensure that they are in compliance.

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